Mega trends that make a difference

The Redwood Blog

Published: 21 October, 2014

Mike Redwood

At this year's All China Leather Exhibition in Shanghai anyone checking the traffic on the streets saw fewer black stretched Audi A6s than in the past. This is a good thing. Many in our industry assumed that the extravagant purchasing that included upmarket motor vehicles and fancy luxury goods would continue to accelerate in China for many years to come. Yet two truisms needed to be brought out of the closet. First the Chinese are not inherently ostentatious and second too much of this sort of consumption has been built on a corrupt system of gifts.

With the government now cracking down on corruption the Chinese consumers are also changing. The cars filling the city streets now are those being bought by young professionals and families. As we are seeing in Europe smaller compact cars are of more interest than large ones and small SUVs are popular for the height and visibility they offer. For Audi the new aspirational car for this group is the A3, which in the long term looks like a much more healthy option.

Also purchases of luxury goods in general in China are becoming much more about experiences, self-reward, individuality and connoisseurship. Once every farmer who successfully exited his village to become a businessman started to buy cigarettes, a plastic brief case and then on up the chain to a series BMW to demonstrate his new status. Similarly factory workers who built up savings from a few years in the southern coastal cities bought Louis Vuitton handbags and Rolex watches; and government officials bought black Audi A6s. All this fitted perfectly with the historic Chinese concept of conformity. Something Hofstede called the collectivist dimension of Chinese society.

The changes we are now seeing are the result of not just increasing wealth but of education and exposure to a wider world. Even the little princes and princesses find the global environment via the Internet. The traditional cultural view of China as a collectivist society is starting to change and with it we are seeing consumption patterns more like those in the west.

This is particularly prevalent among the younger generations and indeed we measure the Chinese not so much by generation by rather by decade with distinct differences being apparent in the post 80s and post 90s generations as the contexts in which each group has grown up have been transforming so rapidly as China has developed.

This should not make us complacent. The evidence is that the young in the west do not understand leather and the post 90s Chinese and their younger siblings are even more urbanised and distant from nature and farming. We have a big job to do to educate these new consumers about nature and sustainable materials like leather. The evidence is that all the younger generations in the world are buying fewer things, and spending more on experiences. We need to develop spending less into a mentality of buying quality; buying well designed and well made leather items that last a long time and offer real value, sentiment and long term benefit. This will be even more important if Chinese GDP growth continues to fall.